Author: Marc Fawzi
(This post was last updated on June 22, ’06, taking into consideration early input from the community, which you can find under Comments.)
For a while now, I’ve been toying with the idea of starting a cooperative venture capital fund where smart, sophisticated people (aka business geeks, e.g., ex Technical Directors, ex Chief Architects, ex CTOs, ex CEOs et al) come together to launch ideas into market.
For example, for Web 2.0 ideas, if we could have a large crowd of Web 2.0 business geeks then it would be quite possible to conduct private placements under an SEC securities law safe harbor for non-accredited –but sophisticated– investors (i.e. business geeks who could judge the risk associated with a given venture/idea that’s within their domain of expertise) such that we could seed the fund as a community. Those who participate would then collectively have as much power as any VC.
Obviously, this requires the involvement of a legal counsel who would structure such a cooperative venture capital fund, so that it would comply with securities law and state regulations. Luckily, I have access to lawyers who work for private equity (PE) investors, as well as enlightened, accredited investors who may see the value in supporting it. But this is not about starting yet another VC fund. This is about giving power to the entrepreneurs, just like how the Web has given power to the producer and caused the middleman to adapt and innovate.
The VC industry is another socio-economic structure that will have to undergo a radical rethinking in the years to come (as the newspaper and the music industry are doing now) or risk losing in the long run. In this context, the fund would be a grassroots remaking of the early-stage funding process. In certain cases, the fund would partner with traditional VCs during the later stages of the ideas it launches.
The driving motivation is that a truly cooperative fund could be launched, supported and managed by a community of business geeks and angel investors that is much more grassroots in its makeup, scale and orientation than the current attempts, but still led by folks with experience and track record. The thesis is that such fund could serve the needs of the community on much wider basis.
It’s definitely a good idea to look at what others, such as YCombinator, have done and improve on that, as I see many ways in which such funds can help a lot more entrepreneurs and launch more ideas while retaining quality of ideas and execution.
But we’ll get to work on that as soon as I setup a collaboration space for us to use in developing this “Geek VC Fund” idea.
In the meantime, please feel free to add your feedback under Comments.